Anime/Manga/Hentai is pretty much the exact opposite of Japanese people in general.

>People have huge eyes
>Girls have great forms
>They have every hair color except black
>Guys appear as very masculine
>They have extreme personalities
>They scream all the time
>Every male ever is well endowed
>Nobody commits suicide when failing
>School is a fun place

But that's probably why Japanese media is largely popular in many places. Still weird how they twist every flaw into a strength.

I thought it came from a natural human instinct that governs when something is "cute".

I mean, that hypothesis isn't really so stupid when you think about it. When one compares the "chibi" art style to the homunculus, one can immediately notice some similarities.

Both have overly large heads and eyes. As everyone should know from high school biology, the homunculus is the depiction of anatomical human weak points. This means that there is a direct correlation between the depiction of weak points and cuteness. As for why the homunculus looks so disgusting, although it should accomplish the "weak point" criteria that I just told, I have no clue, there are most likely many other factors that play a role in when something seems "cute" to humans.

Depends on the genre nowadays. The reason why in many shows the characters have such small noses and large eyes is because you don't need the nose to show emotion. It's always in the mouth and eyes.
The reason why japanese animation does not actually have lip syncing is because of it being based on traditional shadow play.